Question 1

The financial leverage percentage is positive when return on assets is greater than return on equity.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following ratios increases when cash is collected on an account receivable?

Accepted Answer

A) Current. 
B) Quick. 
C) Return on assets. 
D) Receivable turnover ratio. 
A) Current. 
B) Quick. 
C) Return on assets. 
D) Receivable turnover ratio.

Question 3

Which of the following transactions will increase a current ratio, which is currently 2.5?

Accepted Answer

A) Receiving cash from signing a 6-month note payable. 
B) Accruing an expense. 
C) Using cash to pay an account payable. 
D) Collecting an account receivable. 
A) Receiving cash from signing a 6-month note payable. 
B) Accruing an expense. 
C) Using cash to pay an account payable. 
D) Collecting an account receivable.

Question 4

MusicPod's earnings per share ratios were $2.47 and $2.07 respectively for 2017 and 2016. MusicPod's stock was trading at $53.00 and $41.50 per share at the end of 2017 and 2016 respectively. The company paid cash dividends per share of $0.85 in 2017 and $0.63 in 2016. Total stockholders' equity was $13,572 million and $11,896 million in 2017 and 2016 respectively. The common shares outstanding were approximately 1,782,000 in both 2017 and 2016. MusicPod's dividend yield ratio for 2017 is closest to:

Accepted Answer

A) 34.4% 
B) 1.4% 
C) 30.4% 
D) 1.6% 
A) 34.4% 
B) 1.4% 
C) 30.4% 
D) 1.6%

Question 5

Baron Company reported the following data:   The cash ratio is closest to:

Accepted Answer

A) 1.14 
B) 0.95 
C) 0.38 
D) 0.36 
A) 1.14 
B) 0.95 
C) 0.38 
D) 0.36

Question 6

Which of the following ratios is not considered to be a test of profitability?

Accepted Answer

A) Current ratio. 
B) Net profit margin. 
C) Return on assets. 
D) Earnings per share. 
A) Current ratio. 
B) Net profit margin. 
C) Return on assets. 
D) Earnings per share.

Question 7

Liquidity ratios concentrate on:

Accepted Answer

A) The operating cycle. 
B) Profitability. 
C) Short-term financial strength. 
D) Ability to pay interest on loans. 
A) The operating cycle. 
B) Profitability. 
C) Short-term financial strength. 
D) Ability to pay interest on loans.

Question 8

Lee Company has provided the following information: • Cash flow from operating activities, $240,000
• Net income, $204,000
• Interest expense, $20,000
• Interest cash payments, $10,000
• Income tax payments, $140,000
• Income tax expense, $136,000
What was Lee's times interest earned ratio?

Accepted Answer

A) 39.0 
B) 18.0 
C) 35.4 
D) 17.7 
A) 39.0 
B) 18.0 
C) 35.4 
D) 17.7

Question 9

The Apple Pie Company had net income of $47,500 and earnings per share of $3.17. Apple Pie declared dividends of $2 per share of common stock during 2016. On December 31, 2016, the stock had a market price of $18.50 per share. Apple Pie's price/earnings ratio is closest to:

Accepted Answer

A) 9.25 
B) 8.11 
C) 5.84 
D) 0.17 
A) 9.25 
B) 8.11 
C) 5.84 
D) 0.17

Question 10

The following return on investment ratios were computed for Steven Company:   Required: 
A.Compute financial leverage percentage for each year and state whether it is positive or negative.
B.Explain briefly the stockholders' advantage or disadvantage for each year, beginning with year 2014.

Accepted Answer

A. 2017: 15% - 12% = +3% positive.
2016:

Question 11

Which of the following transactions decreases earnings per share?

Accepted Answer

A) Declaring cash dividends payable to the common stockholders. 
B) Purchasing treasury stock. 
C) The accrual of revenue. 
D) Declaring and distributing a 10% common stock dividenD.Issuing additional shares of common stock via a stock dividend increases the number of common shares outstanding and therefore decreases earnings per share. 
A) Declaring cash dividends payable to the common stockholders. 
B) Purchasing treasury stock. 
C) The accrual of revenue. 
D) Declaring and distributing a 10% common stock dividenD.Issuing additional shares of common stock via a stock dividend increases the number of common shares outstanding and therefore decreases earnings per share.

Question 12

Wildlife Co. reported net income of $8.3 million, interest expense of $0.5 million and is in a 30% tax rate bracket. Wildlife's average total assets are $65.8 million and average stockholders' equity is $48.6 million. Wildlife's financial leverage percentage is closest to:

Accepted Answer

A) 3.7% 
B) 4.5% 
C) 4.0% 
D) 4.7% 
A) 3.7% 
B) 4.5% 
C) 4.0% 
D) 4.7%

Question 13

Purchasing treasury stock increases the return on equity ratio.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following correctly describes the effect of Mogul Company declaring and distributing a 10% common stock dividend?

Accepted Answer

A) Mogul's current ratio decreased. 
B) Mogul's return on equity ratio decreased. 
C) Mogul's debt-to-equity ratio remained the same. 
D) Mogul's return on assets decreaseD.Stock dividends do not affect debt or total stockholders' equity.Therefore, the debt-to-equity ratio remained the same. 
A) Mogul's current ratio decreased. 
B) Mogul's return on equity ratio decreased. 
C) Mogul's debt-to-equity ratio remained the same. 
D) Mogul's return on assets decreaseD.Stock dividends do not affect debt or total stockholders' equity.Therefore, the debt-to-equity ratio remained the same.

Question 15

Which of the following transactions will increase the earnings quality ratio?

Accepted Answer

A) Paying cash to suppliers. 
B) Accruing sales revenue. 
C) Selling treasury stock for more than its cost. 
D) Collecting an account receivable. 
A) Paying cash to suppliers. 
B) Accruing sales revenue. 
C) Selling treasury stock for more than its cost. 
D) Collecting an account receivable.

Question 16

The debt-to-equity ratio measures which of the following?

Accepted Answer

A) Liquidity. 
B) Solvency. 
C) Profitability. 
D) Market strength. 
A) Liquidity. 
B) Solvency. 
C) Profitability. 
D) Market strength.

Question 17

If the current ratio is 2, what will be the effect of the payment of a cash dividend, which was recorded as a liability on the date of declaration?

Accepted Answer

A) An increase in the current ratio. 
B) A decrease in the current ratio. 
C) No effect on the current ratio. 
D) A decrease in the cash coverage ratio. 
A) An increase in the current ratio. 
B) A decrease in the current ratio. 
C) No effect on the current ratio. 
D) A decrease in the cash coverage ratio.

Question 18

Teague Company's working capital was $40,000 and total current liabilities were one-fourth of that amount. What was the current ratio?

Accepted Answer

A) 1.00 
B) 1.25 
C) 3.00 
D) 5.00 
A) 1.00 
B) 1.25 
C) 3.00 
D) 5.00

Question 19

Which of the following statements is correct?

Accepted Answer

A) A ratio calculation is most relevant in isolation. 
B) One of the advantages of ratio analysis is that it allows companies of different sizes to be compared. 
C) Finding benchmarks for comparison is a straightforward task. 
D) It is always preferable to compare a company's performance to industry-wide ratios rather than to use a competitor's ratios. 
A) A ratio calculation is most relevant in isolation. 
B) One of the advantages of ratio analysis is that it allows companies of different sizes to be compared. 
C) Finding benchmarks for comparison is a straightforward task. 
D) It is always preferable to compare a company's performance to industry-wide ratios rather than to use a competitor's ratios.

Question 20

Which of the following statements is not correct?

Accepted Answer

A) Purchasing fixed assets through debt financing decreases the financial leverage ratio. 
B) Accruing an expense will affect the net profit margin ratio. 
C) Return on equity may increase even when the financial leverage ratio decreases. 
D) Purchasing treasury stock results in a decrease in total asset turnover. 
A) Purchasing fixed assets through debt financing decreases the financial leverage ratio. 
B) Accruing an expense will affect the net profit margin ratio. 
C) Return on equity may increase even when the financial leverage ratio decreases. 
D) Purchasing treasury stock results in a decrease in total asset turnover.

The financial leverage percentage is positive when return on assets is greater than return on equity.

Which of the following ratios increases when cash is collected on an account receivable?

Which of the following transactions will increase a current ratio, which is currently 2.5?

Baron Company reported the following data: The cash ratio is closest to:

Which of the following ratios is not considered to be a test of profitability?

Liquidity ratios concentrate on:

The Apple Pie Company had net income of $47,500 and earnings per share of $3.17. Apple Pie declared dividends of $2 per share of common stock during 2016. On December 31, 2016, the stock had a market price of $18.50 per share. Apple Pie's price/earnings ratio is closest to:

The following return on investment ratios were computed for Steven Company: Required: A.Compute financial leverage percentage for each year and state whether it is positive or negative. B.Explain briefly the stockholders' advantage or disadvantage for each year, beginning with year 2014.

Which of the following transactions decreases earnings per share?

Wildlife Co. reported net income of $8.3 million, interest expense of $0.5 million and is in a 30% tax rate bracket. Wildlife's average total assets are $65.8 million and average stockholders' equity is $48.6 million. Wildlife's financial leverage percentage is closest to:

Purchasing treasury stock increases the return on equity ratio.

Which of the following correctly describes the effect of Mogul Company declaring and distributing a 10% common stock dividend?

Which of the following transactions will increase the earnings quality ratio?

The debt-to-equity ratio measures which of the following?

If the current ratio is 2, what will be the effect of the payment of a cash dividend, which was recorded as a liability on the date of declaration?

Teague Company's working capital was $40,000 and total current liabilities were one-fourth of that amount. What was the current ratio?

Which of the following statements is correct?

Which of the following statements is not correct?

Financial Statements and Business Decisions

Investing and Financing Decisions and the Accounting System

Operating Decisions and the Accounting System

Adjustments, Financial Statements, and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue, Receivables, and Cash

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

Reporting and Interpreting Liabilities

Reporting and Interpreting Bond Securities

Reporting and Interpreting Stockholders Equity

Statement of Cash Flows

PPA: Reporting and Interpreting Investments in Other Corporations

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Exam 13: Analyzing Financial Statements

The financial leverage percentage is positive when return on assets is greater than return on equity.

Which of the following ratios increases when cash is collected on an account receivable?

Which of the following transactions will increase a current ratio, which is currently 2.5?

Baron Company reported the following data: The cash ratio is closest to:

Which of the following ratios is not considered to be a test of profitability?

Liquidity ratios concentrate on:

The Apple Pie Company had net income of $47,500 and earnings per share of $3.17. Apple Pie declared dividends of $2 per share of common stock during 2016. On December 31, 2016, the stock had a market price of $18.50 per share. Apple Pie's price/earnings ratio is closest to:

The following return on investment ratios were computed for Steven Company: Required: A.Compute financial leverage percentage for each year and state whether it is positive or negative. B.Explain briefly the stockholders' advantage or disadvantage for each year, beginning with year 2014.

Which of the following transactions decreases earnings per share?

Wildlife Co. reported net income of $8.3 million, interest expense of $0.5 million and is in a 30% tax rate bracket. Wildlife's average total assets are $65.8 million and average stockholders' equity is $48.6 million. Wildlife's financial leverage percentage is closest to:

Purchasing treasury stock increases the return on equity ratio.

Which of the following correctly describes the effect of Mogul Company declaring and distributing a 10% common stock dividend?

Which of the following transactions will increase the earnings quality ratio?

The debt-to-equity ratio measures which of the following?

If the current ratio is 2, what will be the effect of the payment of a cash dividend, which was recorded as a liability on the date of declaration?

Teague Company's working capital was $40,000 and total current liabilities were one-fourth of that amount. What was the current ratio?

Which of the following statements is correct?

Which of the following statements is not correct?

Financial Statements and Business Decisions

Investing and Financing Decisions and the Accounting System

Operating Decisions and the Accounting System

Adjustments, Financial Statements, and the Quality of Earnings

Communicating and Interpreting Accounting Information

Reporting and Interpreting Sales Revenue, Receivables, and Cash

Reporting and Interpreting Cost of Goods Sold and Inventory

Reporting and Interpreting Property, Plant, and Equipment; Intangibles; and Natural Resources

Reporting and Interpreting Liabilities

Reporting and Interpreting Bond Securities

Reporting and Interpreting Stockholders Equity

Statement of Cash Flows

PPA: Reporting and Interpreting Investments in Other Corporations

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